BUSM2412: Marketing for Managers

Assessment 3: Individual Assignment

Nguyen Phuong Chi- s3393080

Starbucks’ marketing strategies analysis

Word count: 1887 (excluding References)

Table of Contents

I. Introduction 1
Starbucks SWOT Analysis 2
II. Current strategy 4
Product life cycle 4
Starbucks’ Segmentation 5
Starbucks’ Positioning 6
Porter’s Generic Strategy 7
Marketing Mix 7
Product 7
Price 8
Place 8
Promotion 8
Recommendation 8
III. Conclusion 8
IV. Reference 8
 I. Introduction

Starbucks is the premier roaster, marketer and retailer of specialty coffee in the world, is an
example of innovation beyond its industry and constant increase (Chen, 2014). From the first
retail shop in Seattle in 1971, the company has over 24,000 stores today in 75 countries
(Starbucks, 2017). In 2013, Starbucks officially entered Vietnam market by opening the first
shop in Ho Chi Minh City via a franchise contract signed with Viet Idea Food & Beverages (Mai
Chi, 2013). Although the highly competitive market with several local giants made the
company’s value share percentage decreased in 2014, its actual value sales increased by 51%
(Euromonitor International 2016). Starbucks has opened 26 outlets in both Hanoi and Ho Chi
Minh City now. For the following analysis, the report will look deeper at Starbucks’ operation in
Vietnam, where its main rivals are Highlands Coffee, Trung Nguyen and The Coffee Bean
(Bowring 2016), by analyzing and examining the micro/macro affecting the company, current
marketing strategies and some recommendations for changes in the future.

Starbucks SWOT Analysis

SWOT analysis is used to demonstrate the micro and macro factors affecting Starbucks’
business in Vietnam market.

STRENGTHS WEAKNESSES
 Strong financial position with the  Premium price
increase in revenues at a compound  Difference between Starbucks’ coffee
annual growth rate of 13% (Marketline, and traditional coffee taste of
2016) Vietnamese
 International reputation with modern  Frequent product recalls influence the
lifestyle brand value and its product demand
 Uniquely designed space and (Marketline, 2016)
consistent with the culture and tastes
of Vietnamese
OPPORTUNITIES THREATS
 Vietnamese consumers are  Café/Bars in Vietnam has reached a
 increasingly cautious when choosing high level of maturity with intense
coffee competition (Euromonitor
 The shift to chained specialist coffee International 2016)
shops with organic coffee  Strong development of street
(Euromonitor International 2016) stalls/kiosks
 Growth of mobile commerce and  Increasingly fast pace of life
advertising on social media in Vietnam
market.

Table 1: Starbucks SWOT Matrix

Specifically, Starbucks benefits from its strong financial budget and international brand
awareness when operating in Vietnam. Starbucks corporation has the annual growth rate of
13% for its revenue (Marketline, 2016), Vietnam market particularly, Viet Idea Food &
Beverages offering the Starbucks brand witnessed the biggest growth of value sales in 2015
(Euromonitor International, 2016).

Table 2. GBN Brand Shares in Chained Consumer Foodservice by percentage in 2015

(Euromonitor International, 2016)

The biggest rival of Starbucks in Vietnam is Highlands Coffee which led sales in 2015 with 38%
of value sales in chained café/bar (Euromonitor International 2016). Compared Starbucks,
Highlands Coffee has the widest outlet network in Vietnam with 160 outlets located in 13 big
cities (Highlands Coffee, 2017). It positions itself for the good quality meeting Vietnamese
tastes, professional service and competitive prices. Otherwise, the four-time prices higher of
Starbucks for similar products appears to be its biggest minus point which was reported on
social media in fourth quarter of 2015 (Buzzmetrics, 2016).

With the thriving economy and improving living standards, people are more cautious of health
issues, especially fake fresh coffee, hence choosing coffee more carefully (Euromonitor
International, 2016). Starbucks can take this opportunity to meet the consumers’ demand with
high quality and global standards products. Because Vietnam becomes a potential mobile
commerce market with the growth of smartphone users and 4G connection (eMarketer, 2016),
Starbucks, one of the global market leaders in mobile payment, can utilize its m-commerce
innovation for selling and delivering.

Regardless of the intense competition in Café/Bar in rich coffee culture of Vietnam, the
increasingly fast pace of life makes people less patience with waiting in queues, which
facilitates the vigorous development of street stalls/kiosks with takeaway service and requires
specialist coffee shop adjust its strategy to appeal busy customers and generate revenues.

II. Current strategy

Product life cycle

Starbucks made its first appearance in Vietnam market in 2013 and experienced a short period
of introduction as most Vietnamese customers had never tasted Starbucks’ coffee before.
Despite its strong brand name, Starbucks still created product awareness and trial for the local
with sale promotions. Then, the company’s value share percentage declined in 2014 due to
greater competition but it actually increased value sales by 51% and recorded the biggest
increase in 2015 (Euromonitor International, 2016). Starbucks increases its profits and market
share by slowly expanding its coffee chain. Thus, Starbucks is believed to go through the barrier
between introduction and growth stage of Product Life Cycle.
 Figure 1. Starbucks’ coffee Product life cycle in Vietnam

Starbucks’ Segmentation, Targeting and Positioning

Starbucks segments its target by demographic, psychographic and geographic. Though several
segments could be identified in a potential market like Vietnam, Starbucks approaches
concentrated targeting marketing. It means that the company emphasizes the narrowly defined
market segment for high quality, premium priced luxury coffee products with catching package.

Premium segmentation

Demographic 25-40 years old

High income class

Geographic Hanoi and Ho Chi Minh city

Psychographic Luxurious and rich people

Western and modern lifestyle
Value the importance of appearance
Care about safety issues
Starbucks offers a unique and personalized offering and highly customer service standard to
satisfy their target customers who favor gourmet coffee products and resonate Starbucks
brand. Regarding positioning, Starbucks positions itself as a highly respected brand providing
premium products with global standard taste which helps to differentiate the firm from other
rivals (Figure 2).

Figure 2: Starbucks’ coffee Positioning map in Vietnam market

Porter’s Generic Strategy

Figure 3: Porter's Generic strategy (Adapted from Porter 1980)

Based on the strong brand equity and high quality products, Starbucks employs Porter's
Differentiation focus strategy when operating in Vietnam. Particularly, the company emphasizes
broad segment of total market which is young Vietnamese people accounted for 50% of the
population and charges a premium price for the product. To succeed and differentiate itself
from other rivals, Starbucks provides a high quality standard of service in its coffee chains,
along with catching store design and technology usage. Following this strategy allows Starbucks
to earn higher profits than low-cost strategy because of the lowers customers' sensitivity to
price resulted from the brand loyalty through the time (Thomps, A et al 2012).

Marketing Mix

Product

Starbucks products can be defined as convenience products because of its relatively

inexpensive and minimal purchasing effort, though Starbucks can be seen as a specialty product
in the Vietnam because of the brand equity, strong brand loyalty and reputation setting
Starbucks apart from other rivals.
 Figure 4: Five levels of product (Reproduced from Kotler and Armstrong 2014)

To understand Starbucks’ coffee offerings in Vietnam, it is crucial to utilize five levels of product
concept (Kotler and Armstrong 2014). The truly reason for customers’ choice of Starbucks is the
brand itself and its Western modern lifestyle which gives a feeling of luxury. The basic product
at Starbucks is premium coffee with high price and meet global standards. To satisfy
“traditional” coffee drinkers’ demand, Starbucks asserts the quality of coffee bean used,
provides convenient stores located in strategic locations with wifi access. For better in-store
experience and service, Starbucks attracts customers by its uniquely designed space for each
store, personalizing products, localizing merchandise and launching Starbucks Rewards for loyal
customers with Green and Gold levels (see Image 1). In the future, Starbucks might want to
launch “Mobile order & pay” and delivery application and expand its product portfolio with
filter coffee and fresh foods.
 Image 1. Examples of Starbucks’ augmented product

Price

Image 2 shows the price of Starbucks’ products which reflects the brand positioning. Starbucks
chooses quality over speed or at least standardization of quality (Megan, 2010) so the pricing
objective of brand is to be product-quality leadership which combines quality, luxury and
premium prices. By offering high quality of product, Starbucks sets the premium price for its
products with 70,000 VND on average. The minimum price is 35,000 VND for espresso which
does not requires much specialty.
 Figure 5: Price/Quality Decision matrix

Image 2: Starbucks’ menu

Place
In Vietnam, customers can easily purchase Starbucks’ products via its chained coffee stores
located in Hanoi and Ho Chi Minh cities. Starbucks’ coffee stores are located in strategic places
where their target customers can easily find and recognize its logo brand such as shopping mall
and large buildings. These places also have a high population density and high living standard.

Promotion
Considering the PLC of Starbucks in Vietnam as mentioned above, Starbucks uses promotional
mix of advertising, sales promotion and public relations. It makes use of interactive media,
especially social media to advertise its products and sales promotion events. The firm focuses
on managing its Facebook pages to engage target customers such as “Boxing day”with 40% off
for past seasons’ merchandise, Gift of the Week (Buzzmetrics, 2016) and Starbucks Reward
Card for customers to get initiatives. Starbucks also uses public relations by organizing
Community Day and Art Day to gain publicity.

Recommendation
Though Starbucks coffee has positioned itself in the middle of the specialist coffee shop
category in the US and maintains a level of quality (Euromonitor International, 2016), Starbucks
set the high price in Vietnam market where 34,48% to 71,44% (depend on the age group) would
like to pay 10,000 VND for a medium cup of regular coffee (Dam Sao Mai, Vo Trung Au, Ngo Ke
Suong, 2015). As mentioned above, Vietnamese are used to filter coffee with strong coffee
flavor so besides only selling premium products, Starbucks might want to change its mind and
make coffee the Vietnamese way by adding filter coffee in the menu with affordable price to
Vietnamese coffee lovers. By doing this, Starbucks could not only localizes its products, boosts
its sales but also instills passion of drinking coffee among Vietnamese young people.
Additionally, Vietnam is considered as a highly potential mobile commerce market because of
the increase in Startphone use as well as consumers’ habit of researching purchases via their
phones (eMarketer, 2016). As a result, Starbucks with its own strength in terms of mobile
market should consider launching “Mobile Order & Pay” which makes Starbucks closer to
customers and boost sales in the near future.

III. Conclusion

Overall, though Starbucks benefits from its international brand name, the company still faces an
intense competition in Vietnam, especially from Highlands Coffee. To succeed in such a rich
coffee culture like Vietnamese market where people can enjoy a cup of coffee in almost
everywhere around the country, Starbucks needs to consider carefully about its strategic
planning in general and marketing strategy in Vietnam particularly. Starbucks has successfully
dominated in four countries in Southeast Asia including Thailand, Indonesia, Malaysia and
Philippines, though Starbucks only ranks fourth in terms of the most frequently visited coffee
chains in Vietnam (Gavin, 2016). It seems that Starbucks struggles to fight local brands offering
Vietnamese coffee taste. Thus, it is a big question for Starbucks that whether or not Starbucks is
confident enough to dominant the Vietnamese market by localizing its products but still
keeping its own specialty.

IV. Reference
Bich Van 2015, ‘Starbucks in Vietnam’, Vietnam Pictorial, 11 May, viewed 12 March 2017,
http://vietnam.vnanet.vn/english/starbucks-in-vietnam/184079.html.

Bowring, G 2016, ‘Local chains take on coffee giants’, Financial Times, 21 June, viewed 12
March 2017, https://www.ft.com/content/189c23bc-055b-11e6-9b51-0fb5e65703ce.

Buzzmetrics 2016, ‘Brand Review Report’, SlideShare, 5 April, viewed 12 March 2017,
https://www.slideshare.net/Buzzmetricsvn/coffee-chains-in-vietnam-brand-review-q42015.

Chen, X, Y 2014, ‘Even with ~20,000 stores worldwide, Starbucks has room to grow’, 11
February, viewed 12 March 2017, < http://finance.yahoo.com/news/even-20-000-stores-
worldwide-130010277.html>.

Dam Sao Mai, Vo Trung Au, Ngo Ke Suong 2015, ‘Consumer Willingness to Use for Roasted
Coffee: A Vietnamese case study’, Journal of Food and Nutrition Sciences, vol.3, No.1-2,
pp.152-156, viewed 12 March 2017, <
http://article.sciencepublishinggroup.com/pdf/10.11648.j.jfns.s.2015030102.39.pdf>.

eMarketer 2016, ‘Mobile Commerce in Vietnam: An Early Picture’, eMarketer, 3 August,

viewed 12 March 2017, https://www.emarketer.com/Brief/Mobile-Commerce-Vietnam-
Early-Picture/5500947#whats-included.

Euromonitor International 2016, ‘Starbucks Corp in Consumer Foodservice (USA)’,

euromonitor, viewed 8 March 2017,
http://www.portal.euromonitor.com.ezproxy.lib.rmit.edu.au/portal/analysis/tab.

Haskova, K., 2015. Starbucks Marketing Analysis. CRIS-Bulletin of the Centre for Research
and Interdisciplinary Study, 2015(1), pp.11-29.

Kotler, P & Armstrong, G 2014, Principles of Marketing, 15th edn.

Mai Chi 2013, ‘Starbucks moves ahead with plan to open more shops in Vietnam’, 1
December, viewed 13 March 2017,
http://english.vietnamnet.vn/fms/business/90346/starbucks-moves-ahead-with-plan-to-
open-more-shops-in-vietnam.html.

MarketLine 2016, Company Profile: Starbucks Corporation, MarketLine, London, United

Kingdom.

Mcardle, M 2010, ‘Starbucks Puts Quality Over Quantity’, the Atlantic, 13 October, viewed
10 March 2017, < https://www.theatlantic.com/business/archive/2010/10/starbucks-puts-
quality-over-quantity/64511/>

Starbucks 2017, ‘Building a Future with Farmers: Committed to 100% Ethically Sourced’,
Starbucks, n.d, viewed 12 March 2017,
https://www.starbucks.com/responsibility/sourcing/coffee.

Starbucks 2017, homepage, Starbucks Corporation, Settles, viewed 18 March 2017,

https://www.starbucks.com/business/international-stores.